Pound Euro (GBP/EUR) Exchange Rate Rises as EUR Succumbs to Poor German Data
(Updated 15:30, 12/4/22) The Pound Euro (GBP/EUR) exchange rate recovered from this morning’s dip as the decline in German economic sentiment eventually pushed the Euro (EUR) lower.
Although the ZEW economic sentiment index printed higher than forecast, it still fell to its worst level since March 2020. The Ukraine crisis has hammered investor morale in Europe’s largest economy, with Germany particularly exposed to the economic fallout.
In addition, news from Ukraine remains downbeat. Speaking today, Russian President Vladimir Putin said that peace talks are currently at a ‘dead end’.
Meanwhile, Russian forces are refocusing their efforts in eastern Ukraine after failing to take the capital city of Kyiv. Many analysts expect the besieged port of Mariupol to fall soon as Russia commits more troops to the assault. Within Mariupol, the Ukrainian resistance is almost out of ammunition and food and may have no option other than to surrender.
At the time of writing, GBP/EUR is trading at around €1.1986. The currency pair has wavered higher overall today, after dropping to a daily low of €1.1963.
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Pound Euro (GBP/EUR) Exchange Rate Falls following UK Employment Report
The Pound Euro (GBP/EUR) exchange rate slipped this morning as investors took a downbeat view of today’s UK jobs data.
Meanwhile, Eurozone data came in above forecasts, although it was still gloomy overall. This may have helped the Euro (EUR) crawl higher against the weakening Pound (GBP).
Pound (GBP) Stumbles amid Mixed Jobs Data
The Pound is under pressure this morning amid cost-of-living concerns following the UK’s most recent employment report.
The latest labour market overview from the Office for National Statistics (ONS) paints a mixed picture. Although the unemployment rate dropped to its lowest level since December 2019, economic inactivity rose once again.
In addition, real pay is falling as inflation outpaces wage growth. This is fuelling concerns about the tightening cost-of-living squeeze.
Darren Morgan, Director of Economic Statistics at ONS, commented on today’s results:
‘Overall, employment in December-February was little changed on the previous three months, and so is still below its pre-pandemic level.
‘While unemployment has fallen again, we are still seeing rising numbers of people disengaging from the labour market, and as they aren’t working or looking for work, are not counted as unemployed.
‘Early estimates suggest there was only a small increase in the number of employees on payroll in March, while job vacancies, although again at a record high, rose at their slowest for nearly a year.
‘While strong bonuses continue to mitigate the effects of rising prices on people’s total earnings, basic pay is now falling noticeably in real terms.’
With the UK’s economic outlook growing cloudier, GBP is on the defensive today.
Euro (EUR) Edges Higher despite Gloomy Economic Sentiment
Meanwhile, the Euro is strengthening against Sterling this morning, after the latest ZEW economic sentiment index came in higher than forecast, perhaps saving EUR from a tumble.
Economic sentiment in Germany edged lower from -39.3 to -41. Although this is still a gloomy reading, it’s not as bad as the drop to -48 that economists were expecting. Current conditions dropped from -21.4 to -30.8, above forecasts of -35.
ZEW President Professor Achim Wambach commented on the results:
‘The ZEW Indicator of Economic Sentiment remains at a low level. The experts are pessimistic about the current economic situation and assume that it will continue to deteriorate. The decline in inflation expectations, which cuts the previous month’s considerable increase by about half, gives some cause for hope. However, the prospect of stagflation over the next six months remains.’
Pound Euro Exchange Rate Forecast: GBP/EUR to Trade in a Tight Range?
With both the UK and the Eurozone facing downbeat data, GBP/EUR may move in a narrow range for the remainder of the session.
In the afternoon, the US inflation rate reading could trigger some activity. The Euro is negatively correlated with the US Dollar (USD), so if a hot US CPI boosts USD then EUR could slip.
News from the Ukraine crisis could also affect the Pound Euro pair. Any negative news would likely weighed more heavily on EUR than GBP.